GCSEBusinessOCRRevision Notes1. Business Activity1.1 Business Enterprise & EntrepreneurshipThe Nature of Enterprise

The Nature of Enterprise (OCR GCSE Business): Revision Note

Exam code: J204

Lisa Eades

Written by: Lisa Eades

Reviewed by: Steve Vorster

Updated on

What is enterprise

  • Business enterprise refers to the spotting and pursuit of a business opportunity that has the potential to make a profit

    • It involves forming an organisation, known as a business or enterprise, that provides customers with the opportunity to buy products or services

  • Enterprises can range from small businesses run by a single person to large corporations with thousands of employees

  • Some examples of enterprises include:

    • A local bakery or restaurant

    • A firm of lawyers

    • A clothing store or retail chain

    • A manufacturing company that produces cars or electronics

    • A software development company

  • Enterprises carefully plan their operations, manage resources such as money, materials, and people, and make decisions to ensure they stay competitive and profitable

    • They also need to comply with relevant laws and regulations to ensure that they are allowed to continue to operate

Characteristics of entrepreneurs

  • An entrepreneur is a person who is willing and able to create a new business idea or invention and take risks in pursuing success

    • These risks can be financial, personal or creative

    • Successful entrepreneurs can identify and pursue opportunities, create value for customers and build thriving businesses

What entrepreneurs do

Role

Explanation

Organising resources

  • An entrepreneur must be able to gather and coordinate the resources necessary to start and operate a business

    • E.g. When Michael Dell started his computer company from his garage, he had to organise resources such as space, computers, software tools, and employees and manage the finances

Making business decisions

  • Entrepreneurs must be able to make decisions that will determine the success or failure of their business

    • E.g. A restaurant owner may need to decide what type of food to serve, where to locate the restaurant, and what prices to charge. These decisions require a combination of market research, creativity, and business skills

  • Making the wrong decisions can lead to wasted resources, lost opportunities, and ultimately business failure

Taking risks

  • Entrepreneurship involves taking financial, personal, or professional risks

    • E.g. An entrepreneur may invest their life savings into a new venture or quit a secure job to start their own business

    • They may also take risks by introducing new products or entering new markets

  • These risks can pay off with great rewards, but they can also lead to failure and financial loss

  • As their business grows, an entrepreneur may make the decision to employ staff to help with its day-to-day operations

    • The entrepreneur may take on the role of mentor, supporting new staff members to carry out their tasks in a particular way

  • Entrepreneurs often posses a valuable set of characteristics and skills

Skills and characteristics of entrepreneurs  

Skills and characteristics chart: skills include communication, teamwork, problem solving, organisation, numeracy, IT. Characteristics include creativity, resilience.
The skills and characteristics commonly possessed by entrepreneurs

  • Perhaps one of the most important skills of an entrepreneur is the ability to communicate persuasively

    • Persuade potential financial backers of the merits of their idea

    • Encourage people to join them in creating the product/service

    • Convince customers of the value of their product/service

  • They should also be able to solve problems, be well-organised and possess key skills such as numeracy and competency in the use of IT

  • Entrepreneurs should be prepared to work with others and build teams to improve the chances of business success

  • A range of personal characteristics are particularly important for entrepreneurs

    • Being prepared to work hard, often for long hours, with little financial reward

    • Resilience and self-confidence are needed to recover quickly and move on from setbacks

    • Creativity and a willingness to embrace innovation

    • Being prepared to take the initiative in making decisions, pursuing opportunities and taking risks

  • All of the skills work together to create and drive an innovative idea towards success

Examiner Tips and Tricks

You could be asked to explain the entrepreneurial characteristics of a business owner. In explain questions you must use evidence from the stimulus material to support your answer.

Risk and reward

  • Entrepreneurs must manage the risks associated with failure, financial loss, and lack of security while striving to achieve the rewards of success, profit, and independence

Risks and rewards of business activity

Scales comparing disadvantages and advantages of business; left side: failure, loss, insecurity; right side: success, profit, independence.
Entrepreneurs balance risks, such as business failure, financial loss and lack of security, with rewards, such as business success, profit and independence

Risks of business activity

Risk

Explanation

Business failure

  • Business failure affects businesses of all sizes and is a risk to both new and established businesses

  • It occurs when a business is unable to meet its financial obligations or when it cannot generate enough revenue to sustain its operations

  • The impact of business failure can be devastating, resulting in job losses, bankruptcy, and financial ruin for the owners and investors

Financial loss

  • This occurs due to factors such as poor financial management, economic downturns, or unexpected events such as natural disasters

  • The impact of financial loss can be severe, resulting in reduced profitability, reduced competitiveness, and reduced ability to invest in growth

Lack of security

  • This is a risk that businesses face in terms of data security, intellectual property theft, or physical security

  • A security breach can result in reputational damage, legal liability, and the loss of customer trust

  • There are many ways in which entrepreneurs can reduce the risks associated with starting up and running a business, including:

    • Careful management of cash flows into and out of the business

    • Conducting thorough market research before and during trading

    • Setting clear aims and objectives

  • If risks are minimised and an enterprise survives and thrives, entrepreneurs can be well-rewarded

Rewards of business activity

Reward

Explanation

Business success

  • This is the ultimate reward that business owners strive for

  • It occurs when a business meets or exceeds its objectives, such as generating revenue, achieving profitability, or expanding its operations

Profit

  • Profit is a measure of the success of a business

  • Profit enables businesses to reinvest in growth opportunities, pay dividends to shareholders, and provide financial stability to the business

Independence

  • This reward is often overlooked but is crucial to the success of a business

  • Independence allows businesses to make their own decisions rather than being subject to the demands of external stakeholders such as investors or creditors

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    Author
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    Lisa Eades

    Author: Lisa Eades

    Expertise: Business Content Creator

    Lisa has taught A Level, GCSE, BTEC and IBDP Business for over 20 years and is a senior Examiner for Edexcel. Lisa has been a successful Head of Department in Kent and has offered private Business tuition to students across the UK. Lisa loves to create imaginative and accessible resources which engage learners and build their passion for the subject.

    Steve Vorster

    Reviewer: Steve Vorster

    Expertise: Economics & Business Subject Lead

    Steve has taught A Level, GCSE, IGCSE Business and Economics - as well as IBDP Economics and Business Management. He is an IBDP Examiner and IGCSE textbook author. His students regularly achieve 90-100% in their final exams. Steve has been the Assistant Head of Sixth Form for a school in Devon, and Head of Economics at the world's largest International school in Singapore. He loves to create resources which speed up student learning and are easily accessible by all.